Overview of Landed Cost Management

Landed Cost Management gives your organization financial visibility into your supply chain costs, including transportation and handling fees, insurance, duties, and taxes. These types of charges can compose a significant portion of the cost of an item.

Landed Cost Management enables you to incorporate the charges accurately into overall financial processes and decision-making activities. Landed Cost Management initially estimates these costs and later updates them with actual amounts as they become known, allocating them to shipments, orders, and products. This enables you to maximize profits, improve visibility into outstanding liabilities, enhance competitiveness, and ensure that complex trade activities are compliant with regulatory mandates.

Landed Cost Management performs three main tasks:

Capture Charges: Landed Cost Management provides the capability to capture charges such as freight, insurance, and so on. These charges are captured and grouped under an entity called trade operation. A trade operation is a logical entity that denotes a single instance of a business transaction or process in which you would like to capture all the charges. An example of this is a single shipment or container.
Perform Allocations: Material PO schedules are associated to charges. This denotes the PO schedules that are part of the trade operation or that are impacted by this trade operation. After the PO schedules are referenced to charges on the trade operation, the charge amount is distributed and allocated to the respective PO schedules and further on to the receipts that are performed on those schedules.
Create Accounting: The final step is to account for all the charges that were incurred. This is done by transferring all the charge information to Receipt Accounting and Cost Accounting.

Landed Cost Management interfaces with the following applications:

Oracle Purchasing: Landed Cost Management receives the material purchase order (PO) information. The trade operation charges are associated with the PO schedules and allocated proportionately to the PO schedules and receipts.
Oracle Receipt Accounting: Tasks performed when managing landed costs use data from Receipt Accounting, and Receipt Accounting will create the accounting entries to accrue landed cost charges.
Oracle Cost Accounting: Charges from Landed Cost Management are absorbed as part of the item cost in Cost Accounting. After the goods are delivered to inventory, the landed cost charges are absorbed into inventory valuation.
Oracle Tax: Taxes may be applicable on the charges coming from Landed Cost Management. The charges are defined in Landed Cost Management. Taxes are automatically calculated, when applicable, by calling the Tax application.
Oracle Payables: In most cases, suppliers send invoices for the services they provide (particularly for freight). When these invoices relate to charges defined in a landed cost Trade Operation, it is possible to automatically associate an invoice amount to a landed cost charge applied to a receipt. For example, when a receipt of items is performed, the bill of lading number from the freight supplier is specified in the receipt. Then when the freight supplier invoice is processed, the invoice line references that bill of lading number. When the freight supplier invoice is interfaced to the landed cost application, the bill of lading number that is common to the receipt and invoice lines is automatically associated. As a result, the landed cost application compares the estimated amount of freight charge in the receipt to the actual amount of freight charge billed in the invoice, and adjusts the cost of the receipt for any calculated cost variance.
Oracle Receiving: Associate advance shipment notices (ASNs) with the trade operation so that corresponding purchase order schedules are automatically associated with trade operations and charges are estimated based on shipment quantity. The receipt information is automatically copied to the trade operation based on ASNs. Also, the allocation process prorates the estimated amount to receipt based on shipment quantity.

Implementing Oracle Receipt Accounting is a prerequisite for Landed Cost Management. Implementing Oracle Cost Accounting is optional. If you implement Cost Accounting, the landed cost charges are also visible in Cost Accounting. Several options are available for implementing Landed Cost Management, based on the source of these landed cost charges. You can implement a combination of one or more of these options where the source of the landed cost charges can be:

A payable invoice from a service provider or supplier
A supplier purchase order for the service
An estimate provided by a supplier or any other source